Roth 403(b) vs Roth 401(k): What Is the Actual Difference?

The short answer

Where they differ

Exactly the same places as the traditional versions differ. A Roth 403(b) in an annuity plan still has 1.5-3% annual fees. A Roth 401(k) with index funds still has 0.03-0.1% fees. The Roth wrapper changes the tax treatment of contributions and withdrawals; it does not change the investment products available or their costs.

Match implications

Even if you elect 100% Roth contributions, your employer match almost always goes into the traditional (pre-tax) bucket. Under SECURE 2.0, employers may optionally offer Roth matching contributions (after-tax employer match), but as of 2026 most have not implemented this. Result: if you are a "full Roth" contributor, you will still have a pre-tax component in your account from employer matching.

The 5-year clock

Each Roth 403(b) and Roth 401(k) has its own 5-year clock starting with the first Roth contribution to that plan. Qualified distributions (tax-free) require: (1) the 5-year clock has run, and (2) you are over 59.5, disabled, or deceased. Rolling a Roth 403(b) to a Roth IRA resets the 5-year clock to the earlier of the IRA or the plan, which can be beneficial if the IRA has been open for five years already.

When to use Roth 403(b) or Roth 401(k)

• You expect to be in a higher tax bracket in retirement than now (early career, high-growth earners)
• You are in a low marginal tax bracket today (taxable income under $47,150 single or $94,300 married filing jointly in 2026)
• You plan to retire in a state with income tax but may move to a no-income-tax state (check noincometaxstates.com for which states apply)
• You want to avoid RMDs on this account (Roth employer plan accounts are now exempt from RMDs during your lifetime, like Roth IRAs)
• You have a long time horizon and tax-free compounding benefit is substantial

Worked example: Traditional vs Roth (same tax bracket)